And what do Iran's controversial elections mean for us? That and
all the week's politics on our roundtable, with George Will, Donna
Brazile, Ron Brownstein from the National Journal, and the Wall Street
Journal's Kim Strassel.

And as always, the Sunday Funnies.

(BEGIN VIDEO CLIP)

STEPHEN COLBERT: Saddam had fantastic taste. There was so much
marble and gold paint, I thought I was watching "The Real Housewives of
New Jersey."

(END VIDEO CLIP)

STEPHANOPOULOS: Hello again. It makes up almost 20 percent of the
economy, impacts every single American, and fixing health care is
President Obama's top domestic priority. Congress could have its first
votes on reform this week, and the president kicked off his lobbying
effort on radio and YouTube yesterday, promising that every dime of his
plan will be paid for.

(BEGIN VIDEO CLIP)

OBAMA: Real reform will mean reductions in our long-term budget,
and I've made a firm commitment that health care reform will not add to
the federal deficit over the next decade.

(END VIDEO CLIP)

STEPHANOPOULOS: And for more, I now welcome the secretary of health
and human services, Kathleen Sebelius. Good morning.

SEBELIUS: Good morning.

STEPHANOPOULOS: Let's begin with the bottom lines of the
president. So far, he's been making the broad case for health care
reform. Says it's up to Congress to fill in the details, but he just
said he has a firm commitment not to increase the deficit. Does that
mean that the president will veto any legislation that is not fully paid
for?

SEBELIUS: I think, George, he is very serious about having health
reform this year and having it paid for. And what is going on right now
is exactly what needs to happen. Congress is fully engaged in, figuring
out the details of this proposal, working closely with the president,
and he's already put on the table, the president has put on the table
about $900 billion. Some of that saving from existing programs that
we've used to drive quality and expand coverage, and other from a
proposal that we alter the minimum tax, that we go back to the
deductions of the Ronald Reagan era for the richest Americans, minimize
the itemized deductions, and come up with about $300 billion. So he's
very...

STEPHANOPOULOS: But the Congress has rejected -- hasn't acted on
these parts...

SEBELIUS: Well, they haven't -- they haven't even started to really
discuss how they want to pay.

STEPHANOPOULOS: Well, they made it pretty clear what they think
about that tax proposal, and some say that the savings the president
outlined will be very difficult to realize as well. So I'm just trying
to get a sense. You say he's very serious. If every diem of this is
not paid for, will the president say, no, that's not good enough,
Congress, and send it back?

SEBELIUS: Well, I think absolutely, he wants a bill that's paid
for, not to increase the deficit at a time when we are looking at
looming deficits. The problem is, though, we can't sustain the current
system. This is not just paying for the future. It's also the fact
that doing nothing has a huge cost. It's crushing businesses, it's
crushing families. Our workers are less competitive. We can't sustain
the system that we have right now, so the status quo is not an
acceptable alternative, and Congress knows that. The providers know it,
the hospitals know it. That's why people are at the table, working this
year on health reform.

STEPHANOPOULOS: And if it's not paid for, he'll send it back?

SEBELIUS: I don't know the detail, but I think what he wants is for
Congress to pay for it.

STEPHANOPOULOS: He wants Congress to pay for it, but you're not
willing to say right now -- you're not willing to make a veto threat
right now?

SEBELIUS: I don't think veto threats at any point are particularly
helpful. What's better is to come to the table and get something done.

STEPHANOPOULOS: How about on the question of taxes? You mentioned
the president's proposal to change those deductions for wealthier
Americans. During the campaign, he was very critical of the idea of
taxing health care benefits, for those who have them right now, and you
were quite critical when you talked to the Congress last month.

(BEGIN VIDEO CLIP)

SEBELIUS: Eliminating the tax write-off, which was a component of
encouraging employees to offer coverage in the first place, has a huge
potential of destabilizing the private market and leaving more Americans
uninsured.

(END VIDEO CLIP)

STEPHANOPOULOS: But Senator Max Baucus, the chairman of the Senate
Finance Committee, came out of a meeting with the president last week
and said the president is willing to consider this idea. Is that true?

SEBELIUS: I wasn't in the meeting with Senator Baucus, but I've
talked to the president a number of times, and he feels strongly that
180 million Americans have employer-provided health care, that taxing
those benefits may indeed discourage employers from offering health care
to their employees, exactly the opposite of what we want to do in the
future.

And it would mean, for many Americans, that they wouldn't keep the
health plan that they have and they like, the doctors that they have and
they like.

What we want to do is fix what's broken. And currently,
employer-based health coverage is working pretty well for millions of
Americans. So anything we do in the future needs to build on that
system that provides benefits.

STEPHANOPOULOS: But there seems to be an emerging consensus,
especially in the Senate -- Senator Baucus, Senator Grassley, a
Republican, and others -- Congressman -- I mean Senator Wyden and
Senator Bennett, and they seem to think this is the way to get a lot of
the savings.

So, again, is the president saying he doesn't want it but he might
accept it or there's no way he's going to accept it?

SEBELIUS: Well, again, I wasn't in the specific conversations. I
think what's happening now is exactly what needs to happen, as they
engage in writing the bill that will mean health reform this year, and
that's putting some details together. And that dialogue will go on,
about how to pay for it.

The president has proposed a payment of savings and, as you say,
shaving the deductions off the wealthiest Americans. He still feels
that that's a better alternative than some other...

STEPHANOPOULOS: But he's not going to get...

(CROSSTALK)

STEPHANOPOULOS: I mean, there's just no evidence that he's going to
get that. All the major leaders on the Finance Committees and the Ways
and Means Committee have said that's not the way they want to go; they
want something else.

SEBELIUS: Well, I think, then, you know, that discussion will
continue in the House and the Senate. But, again, what we don't want to
do is have, at the end of the day, a tax on benefits that actually says
to employers it's better to dump the benefits that you have; it's better
to put those employees in the private market without employer-based
coverage. That's a bad direction to move.

STEPHANOPOULOS: Is there a way to reform the treatment of those
health benefits, the tax treatment of the health benefits without
eliminating the complete deduction?

SEBELIUS: Well, I think that's what the Senate and House members
are looking at: Is there a level above which you could tax; is there
some kind of breaking point where it might be acceptable policy?

But, at this point, the president feels strongly that there are some
other alternatives to pay for this.

What's unacceptable is the status quo. And there are lots of people
on Capitol Hill who feel, if we just don't do anything, it will be OK.
It will not be OK.

(CROSSTALK)

SEBELIUS: ... business and families and government.

STEPHANOPOULOS: Probably the biggest flash point, right now, is
this whole notion of whether or not to have a public health insurance
plan to compete with the private insurance.

SEBELIUS: Right.

STEPHANOPOULOS: And that is drawing the most fire from Republican
senators. Take a look.

(BEGIN VIDEO CLIP)

(UNKNOWN): The American people are starting to connect the dots and
see these as, sort of, gateway drugs to the government takeover of
health care. It's like putting an elephant in a room with some mice and
say, "OK, fellows, compete."

After a while, the elephant has taken over the room and the only
choice is the elephant.

(END VIDEO CLIP)

STEPHANOPOULOS: To back that up, we'll look at a study from the
Loewen (ph) Group, a respected health care group that says that if this
public insurance option paid Medicare rates, 70 percent of those now
getting private insurance would migrate into the public plan, and that
would be -- basically, it would swallow up the private plans.

SEBELIUS: I think there's a lot of dispute about the numbers that
Loewen (ph) Group used. And also, there hasn't been any decision about
what rates would be paid.

What the president's said all along is, we want a level playing
field. But having some competition and having some choice for consumers
is a good thing. I don't think it's any surprise that insurance
companies would rather have a system where everybody must buy coverage
and there are no competitors.

So, you know...

(CROSSTALK)

SEBELIUS: ... new customers.

STEPHANOPOULOS: Doesn't the public plan only make sense if it
actually does pay lower rates than the private plans so that it's lower
in cost?

SEBELIUS: I don't think you have to pay lower rates. I think what
you have to do is, maybe, cut some of those overhead costs and have
innovative strategies.

What consumers will have is choice. And in lots of places in the
country, absent a public option, absent some kind of competitive option,
people would have no choice.

There's one dominant company and that really doesn't drive
innovation; it doesn't drive much in terms of quality care. And that's
really the goal at the end of the day.

We know that higher cost doesn't translate into higher quality. And
what we want to do is have highest-quality, lower-cost care for all
Americans.

STEPHANOPOULOS: The political problem with the public option is
that, right now, at least, Republicans don't seem eager to sign on. All
but one Republican member of the Senate Finance Committee has said
public option. And to bridge that gap, Senator Kent Conrad, Democrat of
North Dakota, is proposing a different kind of a system, co-ops, like --
that would be similar to rural electric co-ops, rural telephone co-ops.

These people could band together, create their own health insurance
cooperative. And he says that could be the alternative, the compromise,
instead of having a full-blown public plan. Is that something the
president is open to?

SEBELIUS: Well, I think that the details of exactly what that looks
like are still being developed, but I think Senator Conrad has come
forward with a creative idea, recognizing that choice and competition
are good in a marketplace. Health insurance marketplace where people
have some choices and have competition to keep prices down is actually a
wonderful strategy, and that's really what the health insurance exchange
is about: stabilize what we have but also create a system where
Americans can have affordable coverage. You share the risk and you move
forward.

STEPHANOPOULOS: Yet, you got other Democrats like Speaker Pelosi
who say that's not a public plan.

So, again, I'm not sure I'm going to get -- have any more luck on
this. But I am trying to figure out, when the president looks at this,
does he say, "I want a public plan, and it must be in the final bill,"
or "I'm open to other sorts of alternatives?"

SEBELIUS: Well, I think -- I think the discussions, right now, are
serious ideas around the table from all sides. He has laid out pretty
clearly and, I think, reinforced his support for a public option, to a
letter to Finance Committee members. He talked about it in a radio
address. He's, you know, continuing to do that.

I don't think it's a surprise that the president supports a public
option. He thinks choice is good, thinks competition is good.

And, frankly, George it exists all over the country. State employee
health plans in 30 states have private options side by side with public
options. It works well. It provides some choice. It exists in
children's health insurance programs.

So the notion that somehow this public plan can't work and it will
drive the private insurance market out of business is just not very
accurate.

STEPHANOPOULOS: And he's going to insist on it?

SEBELIUS: I think he is making it clear the -- that's a direction
he thinks will be beneficial for the public and for -- to make sure that
costs go down. And that's a central belief of his. This has to lower
costs for everyone.

STEPHANOPOULOS: Secretary Sebelius, thanks very much for your time
this morning.

SEBELIUS: Thank you.

STEPHANOPOULOS: Let me now bring in, for Republican a perspective,
former governor of Massachusetts Mitt Romney, also a former presidential
candidate.

Let me just start, right out there, Governor, with the public
option. Is that a red line for Republicans?

If there's a public option in this plan, should Republicans reject it?

ROMNEY: Yes, of course, they should. Let's -- let's start out from
the very beginning, which is Republicans recognize and have said for a
long time we've got problems in health care; we need health care reform.

And, you know, we took that on in Massachusetts. We decided we
wanted to get everybody insured. We've done that. I understand that
the president considers his plan, in some respects, following the model
of Massachusetts.

Let's learn from our experience. And that is, we got everybody in
our state insured. Some 98 percent now are covered by insurance. And
we did not have to put in place a government plan.

We have competition in the health insurance market. There are
hundreds of health insurance companies that all compete with each
other. We don't need to have the government get in and create a health
insurance company in order to have competition. We've already got

And let's be clear, here, George. This is not about getting
competition in health coverage, which is already there. This is instead
a Trojan horse. Barack Obama, when he ran for office, said he's in
favor of a single-payer system. He's said it for years. This is a way
of getting government in the insurance business so they can take over
health care.

It's the wrong way to go. And every single Republican and every
thinking Democrat who knows something about the private sector would
realize the wrong thing for America is to get government into the health
care business.

STEPHANOPOULOS: Except, Governor, you bring up the Massachusetts
plan. And you're exactly right. And most studies have shown that
Massachusetts has done a very good job of expanding coverage with this
plan but has not done as good a job of controlling costs.

And some say that's because of the absence of a public plan. Alan
Sager, professor of health policy at Boston University has said that
health spending per person in Massachusetts has increased faster than
the national average in seven of the last eight years.

ROMNEY: Massachusetts is an expensive state to do a lot of things.
But the key thing I can tell you is this. What's happened to the health
insurance premium for people buying insurance in Massachusetts? It's
been cut in half.

For an individual, a young male, let's say 35 years old, buying
insurance in Massachusetts for themselves, the premium has been cut in
half since our plan went in place.

So the cost of buying insurance is down. And that's the course that
you have to have for the nation. Look, the idea that you have to get
government into an enterprise in order for that to become competitive
makes no sense at all.

If it made sense, we'd have a government trucking company, a
government automobile company, a government clothing company, a
government farm company. That just is the wrong way to go.

We could get our private industry to create better products and
better services. That's what's happened throughout our economy. That's
what driven our economy to be the most powerful in the world. We do not
need government in the health market.

STEPHANOPOULOS: It has worked for Medicare. It has worked for
veterans' care, hasn't it?

ROMNEY: Oh, it's worked terribly. I mean, look at something like
Medicaid. When Lyndon Johnson signed Medicaid, he said this is going to
cost about $500 million a year. Now, it costs $500 billion a year,
1,000 times more.

Now, I realize there's been some inflation, but not that much. The
wrong way to go is to get government into an entity in our economy as
large as health care and expect anything to occur besides a Trojan horse
effect of a single-payer system crowding out the private markets. It
would be terrible for hospitals, awful for doctors, and ultimately it
would be a disaster for the people in America, because they wouldn't be
able to choose private plan.

STEPHANOPOULOS: I actually said Medicare, not Medicaid, and a lot
of experts believe that Medicare has helped eliminate poverty among the
elderly. But I want to move on to national security. You saw those
Iranian elections yesterday. A great deal of protests in the streets.
Some suggesting that this election was stolen from the opposition. I
want to show you what Secretary Clinton had to say about the elections
yesterday.

(BEGIN VIDEO CLIP)

SECRETARY OF STATE HILLARY RODHAM CLINTON: The United States has
refrained from commenting on the election in Iran. We obviously hope
that the outcome reflects the genuine will and desire of the Iranian
people.

(END VIDEO CLIP)

STEPHANOPOULOS: What do you think of the administration's response
to the election so far and how would you respond?

ROMNEY: Well, first of all, the comments by the president last week
that there was a robust debate going on in Iran was obviously entirely
wrong-headed. What has occurred is that the election is a fraud, the
results are inaccurate, and you're seeing a brutal repression of the
people as they protest.

The president ought to come out and state exactly those words,
indicate that this has been a terribly managed decision by the
autocratic regime in Iran.

It's very clear that the president's policies of going around the
world and apologizing for America aren't working. North Korea is not
just saber rattling. They've taken the saber out of the sheath. Iran
is moving headlong towards nuclearization. Russia is on the same course
they were on. And all of the apologies that he provided to the
Europeans have not led any of the European nations to provide additional
support for us in Afghanistan.

Look, just sweet talk and criticizing America is not going to
enhance freedom in the world.

STEPHANOPOULOS: Others have argued, Governor, that the president's
speech and the president's outreach is one of the things that led to
Hezbollah being defeated in the Lebanese elections last week. And one
of the things that led to such an outpouring in the streets in
opposition in Iran. Do you dispute that?

ROMNEY: You know, I can't tell you what led to the people running
into the streets in Iran. I hope, in fact, that they're very anxious to
see new leadership in that country. But I can tell you that the results
are what I'm interested in. Is Iran still pursuing nuclear weaponry?
And there's no question about at.

And one aspect of what the president said may have been well
received in Iran, but I think it was poorly received in Israel and
around the world. And that's when -- well, actually, he made a
180-degree flip from what he had said during the campaign. During the
campaign, when he spoke to AIPAC, he said he would do everything in his
power to keep Iran from having a nuclear weapon. And then he went to
Cairo and said that no single nation should have the ability to deny
another nation the right to have a nuclear weapon. That is an
180-degree flip of a dangerous nature. I'm sure it was welcome in many
streets in the Arab world and in the world that's most -- include the
Persian world, Iran as well. But that's not right for America. That's
not right for world security.

STEPHANOPOULOS: I believe the administration has said that they
believe that Iran could have the right to nuclear power with appropriate
safeguards, but not a nuclear weapon.

But what would you do now then? If you were president -- you know,
it's not just President Ahmadinejad in Iran who said that he believes
Iran should have a right to nuclear power. It's the supreme leader. It
was -- every candidate in the race said that Iran should have a right to
pursue nuclear power.

ROMNEY: We don't have any question about nuclear power, and that
was not the statement that the president made that was most offensive.
It was his statement that no single nation should have the ability to
deny another nation the right to nuclear weaponry.

Now, of course with regards to nuclear power, we have no problem
under the Nuclear Nonproliferation Treaty for nations to pursue nuclear
power. And in the case of Iran, it's pretty clear that's not what
they're doing. When you sit on a lake of oil, you're not looking for a
new source of energy. They're obviously developing this technology for
military purposes. And offers were made, including by Russia, to
provide the necessary nuclear material for nuclear power, and the
Iranians turned that down. So let's not pretend or give into the
Iranian way of thinking, that somehow this is about nuclear power. It's
very clearly about nuclear weaponry. And you also see, of course, the
same kind of outrage coming from North Korea.

STEPHANOPOULOS: Let's talk some politics right now. There was a
Gallup poll this week, polling Republicans about the leadership of the
Republican Party and asking who speaks for the Republican Party. And
none of the above got more votes than anyone else, but Rush Limbaugh 10
percent, Newt Gingrich 10 percent, Dick Cheney 9 percent. Is it healthy
that these three are seen as, by Republicans, the top spokespeople for
the Republican Party today?

ROMNEY: Well, I think it's very helpful to have a lot of voices as
we do. As you know, when you have the White House, you've got one
single voice that speaks for your party. When you don't have the White
House, you got a lot of people coming forward that speak and express
their views. We have a lot of people with views that are very
consistent on a number of issues. It's a good thing. You're seeing
great senators come forward, congressmen, governors. Some new faces. I
was just with Chris Christie in New Jersey, running for governor there.
Bob McDonnell in Virginia. I think you're going to see some more voices
come forward, and that gives our party the kind of energy and passion I
think we're going to need to pick up some seats in the 2010 elections.

STEPHANOPOULOS: But you're also facing a demographic option. Mike
Murphy, the Republican strategist, points this out in Time magazine this
week. He says the Republicans are facing an ice age. And what he
points to is the fact that in the last election and if you look at
polling today, the Republican Party is losing young people. It is
losing Latinos. It is losing well-educated Americans. That this really
is a time, that if the Republican Party doesn't reform, Mike Murphy
says, it will die.

How specifically should the Republican Party expand its outreach
right now, become a more inclusive party for those voter groups that it
is now losing?

ROMNEY: Well, what you don't do is try and change your principles.
But what you do is make sure that you're communicating your principles
in an effective way to the audiences of America that are listening.

Hispanic-Americans ought to be voting Republican. We're the party
of opportunity. We're the party of keeping taxes down. We're the party
that want people to have choice in their schools and choice in their
health care.

STEPHANOPOULOS: But as you know, over the last couple of years --
let me just interrupt right there on Hispanic-Americans -- a lot of
Hispanics saw the Republican Party as the party trying to keep Hispanics
out of the country. Whether it was fair or not, that was the
impression. How do you counter that?

ROMNEY: You got to make sure that you fight very hard to get your
message through. And you're right, George, in many cases, the people on
the opposition said that Republicans were anti-immigrant, which --
nothing could be further from the truth. Republicans celebrate
immigrants coming legally into this country, even becoming citizens. I
was at a big rally in Iowa, someone stood up there and said I just got
sworn in as a U.S. citizen. The crowd stood up and cheered. We're a
party that loves legal immigration.

But like most Americans, we're not wild about illegal immigration.
We want to cut back on illegal immigration so we can keep legal
immigration thriving and robust. So those are messages we have to make
sure that we communicate effectively, and recognize our opposition will
try and muddy the waters and make us look like we're something we're
not. But we need to do a better job, and that's one of the advantages
of having so many voices out there right now. We an find people who can
get that message across.

STEPHANOPOULOS: And how about you personally, looking back at your
own campaign? And it certainly seems like you're keeping the option
open to run again. Looking back at your last campaign, one of your top
New Hampshire supporters, Tom Rath (ph), suggested to National Journal
that your problem was you lost what was your strongest selling point,
the ability to be the economy's Mr. Fix-it. Do you agree with that
analysis? And do you think it's something you have to fix if you're
going to run again?

ROMNEY: Well, you know what, there are a lot of times that I can
sit back and look back to my last campaign and say, what could I have
done better. And I'm sure Tom Rath makes a good point there. I
wouldn't argue with him. There are a number of things I probably would
have done differently if I had the chance to do it again. But that's
not the way life works. You look forward.

STEPHANOPOULOS: OK.

ROMNEY: And I'm spending my time looking forward. I think it's
critical at a time like this that we bring more balance to Washington.
With an issue like health care on the docket, for instance. In
Massachusetts, when we dealt with that issue, we spent two years,
Republicans and Democrats, coming together. We got -- In the vote of
the legislature, it was 198-2 to pass our plan. Senator Kennedy and I
were there at the celebration of our plan. We did something on a
deliberate and comprehensive basis that involved both parties.

We're not doing that in Washington. Republicans have been pushed
aside. We need to see if we can't bring more balance to Washington.
And I'm going to fight to do that in the coming year or two.

STEPHANOPOULOS: OK, Governor Romney, thanks a lot. We look forward
to having you back.

ROMNEY: Thanks, George.

(BEGIN VIDEOTAPE)

DAVID LETTERMAN, HOST, CBS'S "THE LATE SHOW WITH DAVID LETTERMAN":
An awkward moment for Sarah Palin at the Yankee game. During the
seventh inning, her daughter was knocked up by Alex Rodriguez.

GOV. SARAH PALIN (R), ALASKA: Statutory rape is what this is,
because a 14-year-old would not consent to being "knocked up,"
quote/unquote.

LETTERMAN: I would never, never make jokes about raping or having
sex of any description with a 14-year-old girl.

PALIN: He doesn't have to apologize to me. I would like to see him
apologize to young women across the country.

LETTERMAN: I think everything's going to be great, because she
called today and invited to take me hunting.

(END VIDEOTAPE)

STEPHANOPOULOS: The Palin/Letterman feud. Neither side backed
down. We'll get to that in a little bit.

First let me bring in our "Roundtable." We're joined, as always, by
George Will; Kim Strassel, columnist with "The Wall Street Journal";
Wayne Johnson from "The National Journal"; and of course, Donna
Brazile. We'll get to that later. Let's talk about the Iranian
elections.

Let's just begin with health care. We saw that debate with Governor
Romney and Secretary Sebelius, and the president trying to maintain this
above the fray. He is laying out the principles that he wants. Doesn't
want to lay down any bottom lines yet, even though he has preferences.
Is that approach going to work?

GEORGE WILL, ABC NEWS ANALYST: No, because this is now a single
issue argument about whether or not we're on a slippery slope to a
single-payer system. That is, it's about the so-called public option.
And the president has said, "If you are starting from scratch" -- he
said this very recently -- he would go to a single payer. That is,
government as the single provider of health care.

Now, there are four arguments for the public option. One is, in the
president's words, it will keep them honest, to try to preserve the
government as a lagoon of honesty, you can argue, refuted by anybody who
reads any budget of any administration.

Second, he says, it will play by the same rules as the private
insurers, and therefore, won't drive them out of business. If you play
by the same rules, as you said to the secretary, what's the point?

Third, it's necessary to give what Secretary Sebelius said a choice
to the consumers. There are 1,300 entities offering health-care plans
in this country. Another one isn't going to change that.

Finally, there's the argument that the American people are not smart
enough to handle something as complicated as health care and have a
competitive market. They've done rather well in computers.

DONNA BRAZILE, ABC NEWS CONTRIBUTOR: I believe the president has
laid out a set of principles that will clearly help Congress through
this very contentious debate this summer.

Of course, the president has said the current system is broken, and
he intends to fix it. But if you like your current insurance, keep it.
But he's also adamant that we reduce costs, and we provide some option
for those Americans without health insurance. Now 46 million Americans,
20 million Americans are under insured. There should be some option
that competes with private insurers to reduce costs and provide the
quality.

RON BROWNSTEIN, "NATIONAL JOURNAL": George, if the Democrats in the
White House allow the public option to become the single or even the
defining issue in this, it would be a case of political malfeasance, for
two reasons. First, it is not essential to making this plan work. And
second, to the extent we are focusing on this, as understandably we are,
you can miss the larger picture of the extent to which consensus has
been achieved on broad -- on the fundamental issue of how you expand
coverage and how you cover those under insured.

There's actually outstandingly broad agreement. The idea of trading
a mandate on all individuals to purchase insurance, an individual
mandate, in turn for sweeping reform of the insurance industry that
would eliminate their ability to deny coverage based on preexisting
condition and have community ratings, comparable prices, regardless of
your health condition or age. The insurance industry has now accepted
that trade.

And Barack Obama, after opposing it as a candidate has accepted
that. Two years ago, when Arnold Schwarzenegger tried to do something
almost exactly like that, the left in California killed the universal
coverage plan. Ted Kennedy is now endorsing that trade. And so is
Chuck Grassley.

STEPHANOPOULOS: And Ted Kennedy is not giving up on the Republicans
(ph). I want to get to that in a second, but let me bring Kim in here
on what you were saying, Ron, is the consensus, because I think you are
right about the consensus.

There is a consensus, it seems, for an individual mandate and
insurance reform which, as Mitt Romney just pointed out, that's kind of
the Massachusetts plan.

KIMBERLY STRASSEL, "WALL STREET JOURNAL": One of the very
intriguing possibilities, there may be something that out of it.

I would argue, though, the bigger problem the administration is
facing -- and you saw it this week -- was a question of how you pay for
this. I think this is even a bigger question of what goes in the plan.
And you saw this -- what they have done is you have this series of
proposals they have floated for tax increases. You talked about some of
them with Mrs. Sebelius.

STEPHANOPOULOS: None of them are making it through...

STRASSEL: None of them. None of them are getting to get through.
So now what you're seeing is the president saying, "Here's what we're
going to get savings." Because "savings" is code for "we're going to
cut things. We're going to cut things that are currently handed out,"
mostly Medicare.

But this raises a whole bunch of other problems. One is, are they
actually going to get those -- those costs? Because no one actually
believes that this is something -- I mean, these are optimistic ideas.

But also the question is, this is robbing Peter to pay Paul.
Fundamentally, you cut services (ph) -- this is to hospitals. They're
already taking a loss when dealing with Medicare and uninsured. So the
way they get by is to raise their prices for the health-insurance
industries. That's just going to raise prices more, if you're cutting
out of that.

WILL: Insuring the uninsured. Easiest thing in the world.
Essentially (ph) easy. Give them a debit card, a health debit card to
pay for it. Mandate that they come in and subsidize their health care.
Simple. There's consensus on that. But not consensus, because the left
knows what it really wants is a slippery slope to single payer.

Donna, you talk about the 46, 47 million uninsured. Fourteen
million of them are already eligible for other government programs and
haven't signed up. Ten million are in households with household incomes
of $75,000 a year and could afford it if they wanted to.

Furthermore, an enormous number in that 47 million who are not
American citizens. Sixty percent of the uninsured in San Francisco are
not citizens.

BRAZILE: We're still paying, George, for their costs, and perhaps
we're paying for some of these fees that the hospitals are charging.
The president said yesterday in his radio address that he -- he would
like to reduce these out-of-pocket fees.

STEPHANOPOULOS: It caused a lot of pain. A lot of hospitals and a
lot of constituencies screaming over that.

BRAZILE: Well, George, people are going to scream one way or
another, because it's been 15 years since the last time we had a
national debate. And what has happened in the last 15 years? We've
seen premiums rise and wages stay the same.

So this is a real serious debate. And, George, I think the only way
to get to making sure that we insure all Americans is to have this
public option.

BROWNSTEIN: Well, you know, George, there's no doubt that there are
elements on the left who see this, in fact, in the way that
conservatives believe, that that idea is to move towards a slippery slope.

If the goal, however, is to create competition in the system, in
some ways, whether or not you have the public option is not the most
important question, whether or not you're going to have payments on...

STEPHANOPOULOS: Let me stop you right there. Because that may be
your analysis, and I don't -- I don't dispute the analysis. But it's
not where the politics are, right now, particularly in the House of
Representatives. Speaker Pelosi saying it is an absolute. It must be
that.

BROWNSTEIN: It will be a very difficult issue to resolve in the
end. But George, I was at an event on Friday with a group of
health-care executives for health-care reform, health-care CEOs for
health-care reform.

There's a guy there named Scott Armstrong who runs the big co-op in
the Seattle area that Kent Conrad talks about as the model for what he
wants to do. And he said at the end of the day, it isn't important --
isn't as important who is writing the check, whether it's a private plan
or a private insurance company, or for that matter, the government and
Medicare. But what they're writing the check for. Are they going to
continue to have kind of fee for service medicine that incentivizes more
activity, you know, kind of churning (ph). Or are we going to have more
integrated care, bundling, paying for results.

In a way, in a sense, the best argument for the public plan is that
it can be alloyed with Medicare and other government efforts to try to
encourage this kind of payment reform. But the payment reform is
probably more important in the long run than whether or not you have the
public plan.

STRASSEL: I'm not sure where anyone gets the idea that you can have
payment reform and reduce costs. We have had Medicare now for how many
decades? It has run at 3 percent higher than growth of the economy the
entire time.

Every effort to reform payment growth has failed. So this is just
-- it is a matter of fact that a government program grows fast. Costs
grow exponentially.

And as George was saying earlier, one of the only ways you
fundamentally make this public option attractive to people is by keeping
the costs lower than you have in the private industry. And you do that
by cutting down on service providers or cutting down on services.

BROWNSTEIN: The problem I with the advocacy (ph) I have is, the
version of the public plan that would do that, that would set -- that
would use Medicare pricing, is almost -- it's almost impossible to
imagine passing that.

So as George was saying before, what you could pass probably would
have less impact on the market than the advocates want. And in a way,
that argues again for not allowing this to become the center piece of
the debate. I mean, there are -- I think there are -- look, the nature
of Washington is to focus on the point of conflict. And you do have the
left digging in, and you do have this becoming a red line for
Republicans. But, you know, it doesn't -- it doesn't have to be that way.

STEPHANOPOULOS: But I think that means the question would depend on
whether or not -- I think Kent Conrad can actually build some support
for this co-op deal, which could split the difference.

But let's move on to the Iranian elections over the weekend. We've
seen protests in the streets for the last couple of days, after these
elections, you know. What we can't tell is exactly how rigged the
elections were. Ahmadinejad wound up with more than 60 percent of the
vote, despite the fact that his lead opponent, Hossein Mousavi, was --
had a lot of support in the streets just before the elections.

So setting that question aside, which is hard for us to know, how
big a crisis is this for the Iranian regime?

WILL: Hard to say. Ferdinand Marcos held an election improvidently
in 1986. And four days later, he was gone because it was widely
considered rigged.

The difference is that the Catholic Church in the Philippines said
it was rigged, and there was an enormous moral authority there.

Ahmadinejad is such a repellant figure, part Zedong, part Joseph
Goebbels. And he has a clear base in the country. So the fact that we
can't tell this was rigged or not is a disaster for the Obama
administration, because you can hardly engage this man now when his
legitimacy, such as it ever was, seems much diminished.

STEPHANOPOULOS: You know what's weird, George, to see them call the
election before all the votes had been counted. And at one vote, they
said he won an overwhelming mandate, you know, less than 20 percent of
the ballots coming in.

I think democracy has been unleashed. And regardless of what
happens going forward in Iran, there is now a new democracy movement.

And you notice that during the middle of the campaign, they'd turn
off the computers. They shut down Twitter and Facebook, the main tools
used by the opposition to try to unseat the president. Now that the
supreme leader has basically said that the president won re-election, I
don't know if there's going to be a recount.

STEPHANOPOULOS: Mousavi this morning has now filed an official
appeal. And the election is not official until the guardian of elders,
all of them on the set, come out and certify. The administration (ph)
of Iran is waiting for that to happen before they make their plea for
reengagement.

And I guess this is -- picking up on George's point, going forward,
the administration was ready to deal with Ahmadinejad before. Should
they continue that policy of engagement? Or should there be a
rethinking in order to resolve it?

BROWNSTEIN: Well, whether or not there should be, they are -- they
are certainly keeping -- as they made clear yesterday, they are
committed to moving forward. And we'll deal with Iran as the way it is,
basically.

But there's no doubt, it makes it more -- much more complicated. If
you did a ledger on this from the U.S. point of view, I think you would
say that this election has clearly shown that that there is a
substantial constituency with Iran for reform within and perhaps a
different relationship with the outside world.

But it also shows you, perhaps even more clearly, that those who
have their hands on the lever of power are not going to concede very
much to that constituency. And those two forces are going to be in
tension and in play. And clearly, the U.S. goal has got to be to speak
to the first and strengthen it. And hopefully, that provide the
leverage on those who are now and remain in power.

STEPHANOPOULOS: There has been no change in power, because
Ayatollah Khameini is the supreme leader, will be the supreme leader.
He calls the shots on U.S. policy.

STRASSEL: And, you know, he made very clear -- I mean, bear in
mind, because you're right, Mousavi had said, he's filed this
complaint. He said, you know, coming to take another look at this.

Remember, the supreme leader did come out this last week, and while
he did not endorse a candidate, what he did do was describe his ideal
candidate, who sounded very much like Mr. Ahmadinejad. So he -- I think
there's obvious that he would like it to be this way.

And I think this shows the pressure that was felt up and down the
regime about this new democracy movement, which by the way, might I dare
say, might have having to do with the neighbor nearby, Iraq, that now
has democracy itself?

WILL: One of the ways that the regime tried to disrupt the
selection was disrupting texting between people. Now, the median age in
Iran is 25. Half the country is under 25. Now, they're not going to be
governed forever by these medievalists in an age (ph) of the Internet,
satellite dishes, cell phones. Intellectual oligarchy is impossible to...

STEPHANOPOULOS: Clearly true. Ron, in the short run, though,
because -- and we're seeing through a glass darkly here, but how does
the Iranian regime respond to this? Do they -- is the thought that
there are -- does this pressure inside, moderate pressure, lead them to
moderate their stance toward the United States, or does it embolden it?

BROWNSTEIN: I think that is the big question, because clearly, this
has demonstrated there is a substantial constituency for a different way
in Iran, and a substantial constituency that would presumably be a
different relationship with the outside world.

But again, they have underscored their willingness to do whatever it
takes to maintain their hold on power. And I think going forward, it
would be -- I think we're just going to have to wait and see. I don't
think we can safely predict whether they will become more flexible to
respond to this internal constituency, or whether this is a sign of a
hard-line response that will continue indefinitely.

STRASSEL: An initial response from Ahmadinejad was, you know, this
is a sign that we need to move even bolder and more bravely ahead. I
think he's going to double his efforts as a way of trying to put down
internal dissent within the country.

But that is going to further complicate the efforts of the Obama
administration. Also, further antagonize tensions with Israel, which is
another question. This right now, though, does not look very good.

STEPHANOPOULOS: But in some ways this ACTUALLY could be welcome
news, in a strange way, to Netanyahu, the Israeli prime minister, who
now will have a clear path for making his argument for taking on the
Iranian regime, militarily.

But Donna, I wonder, going back to the president and President
Obama. I think Ron's right. I think the administration feels they have
no choice but to continue engagement, regardless of the outcome, unless
there's a Tiananmen-Square-style crackdown...

BRAZILE: Well, we'll see, because I don't think you can put these
young people back in the little box and expect them to go on and act
like nothing happened.

But Mr. Netanyahu is giving a major speech today to respond to the
president's Cairo address and to outline the steps that Israel will take
to not just secure its future, but also the steps that it's willing to
take to begin whatever two-state process towards engaging the
Palestinians. So this is a crucial moment for President Obama, not just
with Iran and the destabilizing efforts in the Middle East. But more
importantly, how the peace process will go forward.

STEPHANOPOULOS: You know what I guess (ph), George? Netanyahu
splits the difference. He comes out for a two-state solution and kind
of holds the line on settlements.

WILL: Well, he holds the line on settlements, but also the state is
going to be an odd-looking state. It will have certain -- not have
certain rights that are inherent, like sovereignty, such as the right to
have armed forces, such as control of the air space. So it will be the
beginning of protracted agonizing situations such as we've had for 40
years.

STEPHANOPOULOS: Let me go bring us back to our politics here at
home with that series -- series of exchange that I showed up at the
beginning, David Letterman and Sarah Palin going toe to toe for most of
the week. It also comes during the week when Sarah Palin was making a
little bit more of an entrance on the national stage by going to that
big Republican dinner and not speaking.

And Kim, can we just begin with you here? Because I see some
commentary in the blogosphere about this. Do you think that David
Letterman got away with murder?

STRASSEL: Well, if you' going to pick a fight with Sarah Palin, she
just draws so such emotion from so many people in America. So he
shouldn't have been surprised this is what he'd gotten. And she's
proved herself pretty feisty, in particular when it comes to her
children. So I think that this could have been expected.

And we'll see how -- he's backed away from this some. And this will
probably disappear, as other political flaps do.

STEPHANOPOULOS: See, I'm surprised -- I think he was going to get
pressure back away more than he did.

BRAZILE: He should have backed away. It was over -- over the line
and tasteless. He should have apologize. He sort of apologized.

Look, Sarah Palin enjoys this type of public discourse with someone
like David Letterman, because it allows her to rally her base, increase
her profile, and to take a stand on something that she believes
strongly, with children. And of course, connect with women.

BROWNSTEIN: She had every reason to be offended. And like Donna
said, what he said was over the line.

But I still think, in the long run, it was a mistake for Sarah Palin
to get into an extended argument with a late-night comedian. When the
election ended, our biggest problem was that 60 percent of voters said
she was not prepared to be president.

Ultimately, she needs to be defining herself on the national stage
by weighing in on things like the health-care bill that we're debating,
or cap and trade, which is coming up. She is being covered now -- I
think her profile in the media as of a celebrity than of a political
leader. And that is just fundamentally not a good place for her to be.
Even though, in this case, she has every reason to be offended. Maybe
it's time to move on.

STEPHANOPOULOS: The other thing is that the polling numbers during
the election thought she wasn't qualified. But she came out of the
elections very popular among the Republican base. Do you think she
squandered that?

WILL: I don't think she squandered it, but I don't think she's
built on it. And I think she's a lagging indicator. All of these
people are lagging indicators. There's a rising generation of
Republicans coming along, and they will be the conversation beginning in
2010 and certainly after.

STEPHANOPOULOS: Can she get back into this conversation?

STRASSEL: Well, I mean, I think she's got to do what that rising
generation of Republicans George is talking about is doing. All the
hard work out there right now. You've got Newt Gingrich; you've Rush
Limbaugh. They're out talking. They have the time and the platform.

The hard work is being done out in the states in the governorships,
where this new generation of people is coming up. It's being done in
Congress where a new breed of generation -- generation of Republicans is
coming through.

Sarah Palin needs to go back and do in Alaska what first gained her
the notice of John McCain, which was actually some very pragmatic work
that resonated on both sides of the aisles. And that is as a reformer.
And that's something that she just needs to go back and continue the
record.

BRAZILE: The USS GOP is still without a captain. It's still
without a leader, still without a plan of action, and still without a
message that will resonate in this new century. So I think they're a
long way from coming out of the wilderness.

STEPHANOPOULOS: Donna has teed up the big debate for the green
room. You guys are going to continue this. You all can watch it right
on ABCNews.com.